HONG KONG (Reuters) – Top Chinese electronics retailer GOME has hired Cazenove to advise on possible new share issuance to potential foreign investors including Carlyle Group and Bain Capital, sources said on Wednesday.
GOME Electrical Appliances (0493.HK), whose founder and ex-chairman is being investigated by Chinese police, is keen to issue new shares in a private placement to new investors to boost its capital, but no financial details have been settled, two sources with direct knowledge of the plan told Reuters.
“Cazenove has a very long and good relationship with GOME, but it won’t be the only bank hired by GOME to advise on its new share sale plan,” said one source.
Several Wall Street and European investment banks have approached GOME in recent months to compete for the role as financial adviser and work with Cazenove on a possible new share sale plan, the source added.
The sources asked to remain anonymous because of the sensitive nature of the talks.
In 2006, Cazenove advised smaller rival China Paradise on its acquisition by GOME. China Paradise was partly invested by Morgan Stanley (MS.N) at the time.
Chen Xiao, then-founder and head of China Paradise, is now GOME’s chairman after Huang Guangyu, GOME’s founder and once China’s richest man, quit the board amid a policy and regulatory investigation into stock manipulation, the official Xinhua News Agency said.
In November, Asia-focused bank Standard Chartered (STAN.L) (2888.HK) acquired Cazenove Asia, including its staff, mostly based in Hong Kong, for an undisclosed sum. [ID:nLD679240]
A spokeswoman for Cazenove Asia in Hong Kong could not be immediately reached for comment. GOME declined to comment.
GOME started to consider bringing in new investors via private placement early this year and the possible deal had drawn attention from several private equity funds, three people familiar with the matter told Reuters last month.
However, little progress has been seen since GOME began its talks with potential investors, who are now waiting for an Ernst & Young [ERNY.UL] report about GOME’s latest financial situation, said the sources.
Among all potential investors, Carlyle and Bain have been considered so far as “the most passionate firms” for a deal with GOME, said the sources.
At least one firm, CITIC Capital, often dubbed by Chinese media as ‘China’s Blackstone’, once looked at GOME, but walked away, said one of the sources.
Hopu Investment Management, a $2.5 billion fund run by top Chinese dealmaker Fang Fenglei, is still looking at GOME and may team up with a foreign fund for a deal, said the sources.
GOME asked accounting firm Ernst & Young to do a special audit of its financial situation after Huang was taken into custody late last year. It hopes the audit will boost investor confidence if no unusual problems are found. The audit should be released in the next few weeks, the sources said.
Trading in GOME shares has been suspended since Nov. 24.
By George Chen
(Additional reporting by Samuel Shen in SHANGHAI) (Editing by Ian Geoghegan)